An improving operating backdrop, a rising-rate environment and expectations of lesser regulations, along with the strengthening of the domestic economy, should continue to support banking stocks. Keeping this in mind, we have selected FS Bancorp, Inc. (FSBW - Free Report) for your consideration.
A positive trend in estimate revisions reflect optimism over the company’s earnings growth prospects. The Zacks Consensus Estimate for FS Bancorp’s current-quarter earnings has moved up 3.1% over the last seven days. Also, the current year’s earnings estimates have climbed 2 cents per share in the same time period. As a result, the stock currently carries a Zacks Rank #2 (Buy).
The stock has surged 76.6% over the past 12 months, widely outperforming the industry’s 26.9% rally.
Here’s What Might Drive the Stock Higher
Earnings Strength: While FS Bancorp’s historical earnings per share (EPS) growth rate of 35.9% compares favorably with the industry average of 12.2%, investors should really focus on its projected EPS growth (F1/F0). Here, the company is looking to grow at a rate of 17.4%, substantially higher than the industry average of 13.2%.
Further, the long-term (three-five years) expected EPS growth of 10% promises rewards for the company’s shareholders. It also has a Growth Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Revenue Growth: Organic growth remains strong at FS Bancorp. Revenues witnessed a compound annual growth rate of 25.5% over the last five years (2012-2016). Further, the top line is expected to increase 10.6% in 2017 compared with 5.8% for the industry.
Favorable ROE: FS Bancorp’s return on equity (ROE) supports its growth potential. Its ROE of 15.6% compares with the industry average of 9.9%, implying that it is efficient in using its shareholders’ funds.
Stock Looks Undervalued: The stock currently has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.
This is one such stock, as it looks undervalued in terms of price-to-earnings, price-to-book, price-to-sales and PEG ratios. The company’s P/E, P/B, P/S and PEG ratios of 12.24, 1.65, 2.72 and 1.22 are below the industry averages of 17.00, 1.68, 4.10 and 1.87, respectively.
Other Stocks to Consider
Some other top-ranked stocks from the finance space are Zions Bancorporation (ZION - Free Report) sporting a Zacks Rank #1, and Bank of Commerce Holdings (BOCH - Free Report) and People's Utah Bancorp (PUB - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Zions Bancorporation witnessed an upward earnings estimate revision of 8.9% for the current year, in the last 60 days. Its share price increased 50.5% in the past 12 months.
Bank of Commerce’s Zacks Consensus Estimate was revised 3.3% upward for the current year, in the last 60 days. The company’s share price increased 48.9% in the past 12 months.
People's Utah Bancorp witnessed upward earnings estimate revision of 2.9% for the current year, in the last 60 days. Its share price increased 46.6% in the past 12 months.
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